Elsevier

Energy

Volume 248, 1 June 2022, 123563
Energy

Contributing to regional decarbonization: Australia's potential to supply zero-carbon commodities to the Asia-Pacific

https://doi.org/10.1016/j.energy.2022.123563Get rights and content

Highlights

  • Consequential emissions from existing key Australian exports are estimated.

  • The potential for replacement zero-carbon exports from Australia is analyzed.

  • Land, water, and energy requirements for new zero-carbon exports are calculated.

  • There is the potential to reduce Asia-Pacific greenhouse gas emissions by about 8.6%.

  • Around 2% of Australia's land mass would be required for solar and wind farms.

Abstract

The Asia-Pacific has experienced prodigious growth in energy use and is by far the world's largest greenhouse-gas emitting region. Australia has played a leading role in meeting the region's energy and resource needs, becoming the world's largest exporter of coal, liquefied natural gas, iron ore, and alumina. Our analysis shows that these exports are tied to sizeable consequential emissions at the point of use or processing, accounting for about 8.6% of the total greenhouse gas emissions of the Asia-Pacific. The paper investigates three pathways by which Australia could instead export zero-carbon energy and products: direct exports of renewable electricity via sub-sea cables, exports of zero-carbon fuels such as green hydrogen, and the export of “green” metals processed from Australian ores using renewable energy. Carrying out robust, high-level calculations we find that Australia has the land and renewable energy resources to become a key exporter of these commodities. Realization of this potential relies on ongoing cost reductions, growing demand-side interest linked to meeting ambitious emission reduction targets in the region, and the development of cross-border frameworks for clean energy trade. If it were to achieve this goal, Australia could make a sizeable contribution to regional decarbonization via renewable-energy based exports.

Introduction

At the time the Kyoto Protocol was negotiated, the Asia-Pacific – a region spanning East Asia, Southeast Asia, South Asia, and Oceania – accounted for less than a quarter of global carbon dioxide (CO2) emissions from fuel combustion. Rapid growth in fossil fuel use, especially in China and India, saw this increase to 49% by 2019 [1]. The International Energy Agency (IEA) expects that under stated policies the Asia-Pacific will account for almost two-thirds of global energy use growth over the coming two decades [1]. If this energy is emissions-intensive, the world will remain on a path towards more than 2 °C of temperature increase relative to pre-industrial levels, contrary to the goals of the Paris Agreement [2,3]. Local air pollution problems would be exacerbated in cities such as Jakarta and Hanoi, resulting in large health and economic costs [4].

The Asia-Pacific has also become the world's largest producer and consumer of heavy materials such as steel and aluminium [5]. Ore processing and metal production are currently carried out in highly emission-intensive ways, with steel manufacturing relying heavily on coal as a fuel and reduction agent. Strong growth in demand for materials linked to long-term needs for investment in urban and other infrastructure [6] is expected as economies recover from the COVID-19 downturn over coming years. Australia's near neighbor, Indonesia, has the potential for substantial demand growth and may enter the group of the world's four largest national economies in the next several decades [7].

Australia is currently the world's largest exporter of both coal and liquefied natural gas (LNG) [8] and as of 2018 was ranked behind only Russia, the United States, and Saudi Arabia in terms of overall fossil fuel energy exports [9]. Australia is also the world's largest producer of iron ore and bauxite [10] and largest exporter of iron ore and alumina [11]. Australia's renewables sector is booming, with sizeable investments in solar and wind power projects. While Australia accounts for only about 0.3% of the world's population [12], it is a key country in terms of commodity supply and the ability to contribute to regional and global decarbonization.

In this paper we calculate the greenhouse gas emissions that occur as a consequence of the use and processing of key Australian export commodities in the form of coal, natural gas, iron, bauxite, and alumina. The great majority of these exports are to the Asia-Pacific (Section 2). We find that consequential emissions tied to these Australian exports account for a significant fraction of the region's total emissions. These emissions dwarf Australia's domestic emissions.

The paper then explores three potential pathways for Australia to reduce its consequential emissions and play an important upstream role as a supplier of zero-carbon exports to the Asia-Pacific (Section 3). Specifically, we analyze the potential to export renewable electricity via sub-sea cables, zero-carbon fuels such as green hydrogen, and “green” metals processed from Australian ores using renewable energy. We perform high-level calculations using generalized assumptions to quantify the ongoing renewable energy, land, and water requirements for Australia to become a sizeable exporter of zero-carbon electricity, liquefied hydrogen, aluminium, and steel (section 4 and Supplementary Material). We also identity and discuss key economic challenges, required policy frameworks, and political and other dimensions of the potential new export model (Sections 5 Economic dimensions, 6 Political and policy dimensions).

The analysis indicates that adopting a new commodity export model centered on renewable energy and zero-carbon processed metals would allow Australia to make a sizeable contribution to decarbonization of the Asia-Pacific, assisting the efforts of major economies in the region to achieve emission reduction goals, including long-run net-zero emission targets. Australia also has the potential to serve as a demonstration of concept to other large commodity exporters that have the land and renewables endowments to decarbonize their exports. The results should thus be of broad interest outside the region.

This paper contributes to the literature on the potential for export decarbonization to assist in achieving regional and global emission reductions. It is well known that there are sizeable cross-border flows in emission-intensive products [13]. Prior papers have explored the possibility for coal export curtailment mechanisms to help in achieving emissions reductions [14,15]. The possibility for phase-outs of oil and natural gas exports has also been analyzed [16,17]. Gulberg [18] examined prospects for Norway to become a “green battery” for Europe through the provision of energy storage services via pumped hydro projects. However no prior study has estimated the potential emissions savings from a new zero-carbon export model for a major commodity exporter such as Australia or the land, energy, and water requirements for achieving such a model. Our paper does so at a time when efforts to reduce greenhouse gas emissions are ramping up and there is growing attention on the emissions embodied in traded products, as evidenced by the European Union's proposal for a carbon border adjustment mechanism [19].

The paper also contributes to the literature assessing new cross-border energy trade initiatives, whether low-carbon or otherwise. Prior literature has assessed projects such as the Association of Southeast Asian Nations (ASEAN) power grid [20,21] and the now-abandoned Desertec initiative [22]. Studies have also examined the viability of an electricity link between Australia and Asia [23,24]. Our focus is broader in that we analyze the potential for a new model of zero-carbon exports from Australia that would involve not only exports of zero-carbon electricity but also of hydrogen and commodities processed in Australia using zero-carbon energy (green steel and aluminium).

The methods employed in the paper to assess the consequential greenhouse gas emissions associated with key commodity exports and to calculate the land, energy, and water requirements for a new export model are new and involve simple but rigorous calculations using parameters from the extant literature. For example, average emissions factors for the production of iron ore and aluminium in China are obtained from recent studies [25,26]. These are used to calculate an approximate value for Australia's consequential emissions from exports of iron ore, bauxite, and alumina, the majority of which go to China. The methods are highly relevant for future analyses of export decarbonization for other commodity exporting countries.

Section snippets

Consequential emissions associated with key Australian exports

We first present calculations of the annual downstream CO2 emissions, termed “consequential emissions”, tied to several of Australia's principal commodity exports. These are scope 3 emissions occurring outside Australia that arise from combustion of exported Australian fuels plus the processing of exported ores and production of metals.

We base the analysis on Australia's thermal coal, natural gas, iron ore, and bauxite and alumina exports – referred to here as Australia's “benchmark exports” –

Pathways to zero-carbon energy trade

Australia is one of the world's best-endowed countries in renewable energy, blessed with sunshine, wind, and a large landmass. The country has recently been installing solar and wind generation capacity at the fastest per capita rate – more than 200 W yr1 – of any developed nation [35] and has the highest installed solar photovoltaic (PV) generation capacity per capita in the world [36]. Northern Australia experiences some of the best insolation in the world, exceeding 6.5 kWh m2 day1 in

Analysis of a new export scenario

Our analysis examines the feasibility of an export scenario for Australia that involves matching its major energy exports and its iron ore, bauxite, and alumina exports with equivalent flows of exports of zero-carbon energy and processed metals. It is based on a scenario in which Australia is assumed to:

  • 1.

    Export the same quantity of energy in green forms as it exported in thermal coal and LNG in 2018–2019, and

  • 2.

    Process currently-exported iron ore, bauxite, and alumina (as measured in 2018–2019)

Economic dimensions

There are various economic requisites for the realization of the zero-carbon export scenario analyzed in this paper. Strong demand for zero-carbon commodities is vital, underpinned by the need for countries to make progress towards meeting emissions reduction targets [80]. Momentum for a low-emissions future in the Asia-Pacific is building. In September 2020 China announced a commitment to reach carbon neutrality by 2060, a change that requires a fundamental shift in its economic model. In

Political and policy dimensions

The export scenario analyzed in this paper would involve a change in the way Australia trades with the world, especially as electricity exports require fixed cross-border energy transmission infrastructure. Australia is seen as a relatively safe and reliable trading partner and has close trade links with countries throughout the Asia-Pacific, although there are current frictions in its relationship with China. Investment links with the Asia-Pacific are somewhat less well developed, with only

Conclusion

This paper is the first to quantify the energy, land, and water requirements for the realization of a new zero-carbon export model for Australia. The calculations show that Australia could feasibly contribute to as much as an 8.6% reduction in the Asia-Pacific's greenhouse gas emissions by switching to the export of zero-carbon electricity, green hydrogen, green aluminium, and green steel. Doing so would require about 2% of Australia's land mass, a large but feasible area. The energy

Credit author statement

Paul J. Burke: Conceptualization, Writing – original draft, Writing – review & editing, Investigation. Fiona J. Beck: Conceptualization, Methodology, Investigation, Writing – original draft, Writing – review & editing. Emma Aisbett: Conceptualization, Writing – original draft, Writing – review & editing. Kenneth G.H. Baldwin: Conceptualization, Methodology, Writing – original draft, Writing – review & editing. Matthew Stocks: Conceptualization, Methodology, Investigation, Writing – original

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

Acknowledgements

This work has been carried out under the Zero-Carbon Energy for the Asia-Pacific Grand Challenge at the Australian National University. The authors are grateful to the IEA for data and to Kylie Catchpole, Christian Downie, Frank Jotzo, and anonymous reviewers for comments. Fig. 2 was sourced from the Global Solar Atlas 2.0, a free, web-based application developed and operated by Solargis s.r.o. on behalf of the World Bank Group, utilising Solargis data, with funding provided by the Energy

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